Hey guys! Welcome here again, In this post we will cover the “Law of Agency” chapter. This topic also important in exam point of view so read and understand carefully and practice for all chapter’s questions given on the site.

What is an Agent

An agent is a person who work on behalf of someone’s in a business. For example there is person (ACCA student) who need for accommodation, but he can not find the place where he can stay, So if he want to find a suitable place then he has to go on “State Agency”. A “State Agency” is working as a middleman, A person who work on state agency has wide contacts from different owner who wants to give their house on rent. These “State Agency” is the best example of an “Agent”.

An “Agent” has authority to make a legal relation on behalf of principal or business holders. Some contracts can be done by agent such as giving property on rent but some contracts is only handled by principal or owner such as selling of property.

Agency relationship

Agency relationship can be established in different ways such as:

Express Agreement

The written or oral agreement between principal and agent.

Implied Agreement

There is no agreement (Written nor Oral) between principal and agent but still they sit together and work together. Basically they work together but they have not any contract or agreement between them.

By Necessity

This is depends on situation or needs such as:

  • Give responsibilities
  • When and where act is necessary because of emergency
  • Not possible to make connection or can not communicate
  • Agent act is in interest of principal

By Ratification

If an agent do anything whom he has not authorization but after knowing the condition principal allow him for that action. Example an agent give the loan to a person of $5000 when he has just authority of giving $4000 only when principal hear about this event he allowed agent to do so.

By Estoppel

In this case there is no relation between principal and a person but still principal accept that the person was/is my agent.


It is a central issue for an agent in the concept of “Agency law“. Authority determines”

  • Power on behalf of principal
  • Principal is liable for which act

Note: If an agent use authority beyond his limit or exceed his power, Principal is still liable to third party because the agent is work for the principal but principle can take action on behalf of breaching the contract.

Types of Authority

Express : The authority which is given by principal to agent in written form.

Implied : Principal give authority to do if the act is reasonably, and if an agent has legally authority to do act, or if an action is not prohibited by the principal.

Apparent or Ostensible : This means if an agent has already a deal and principal ratify that act in past so he can do that act in future as well.

Breach of Warranty of Authority

If an agent exceed his limit of authority and principal ratify his act then principal is liable and if principal not ratify then agent is liable for “Breaching of Warranty of Authority“.

Liability in Agency law

In this case agent disclose that he is working on behalf of principal, so directly the activity or contract will be take place between principal and third party, so the agent is not liable for anything in this case but principal is.

Agent will be liable if:

  • He show an intension to take personal liability by contracting or signing on document
  • Agent did not disclose principal
  • When agent is acting on behalf of principal where there no principal.

An Agent duty

There is a fiduciary relationship between agent and principal like a trustee, Agent should do:

  1. Not to do or create conflict for his personal interest
  2. He should act in principal interest
  3. He should avoid from making secret profit
  4. Principal money should be accounted by him

Remedies if an agent breach the contract

  • Principal can cancel the contract from third party where the contract is made by the agent
  • Agent can be fired without any notice
  • Principal will not be liable to pay money but can recover money from to agent already paid for contract
Agent Right toward principal
  • Agent can claim for the services which he has already done completely and with honesty
  • He can claim for those expenses which occurs during the job which he is doing for principal
  • He can keep principal’s property until his expenses are paid by the principal

We try our best to explain each and everything which is necessary to pass the “Corporate and business law” exam. “Law of Agency” is usually examines in the exam, so read and understand “Law of Agency” and practice for its questions, You can find lots of practice questions on your site [Click here] for F4 notes.

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Naveen Rajput

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